- Ferro chrome output drops by 4.4% m-o-m
- Holiday demand may support prices in late September
China’s production of high-carbon ferro chrome totaled 953,486 tonnes in August, down 4.4% from July’s record high of 997,500 tonnes, according to Mysteel’s latest survey of the ferro chrome smelters hosting over 95% of total domestic capacity.
By region, North China’s Inner Mongolia – the country’s primary ferro chrome-producing hub, accounting for 77.7% of national output – saw the alloy output edge down 1.6% on month to 739,700 tonnes in August. Ferro chrome production in South China’s Guangxi posted the steepest on-month decline of 49.6% to 28,500 tonnes, while that in Southwest China’s Guizhou also slumped by 11.5% to 38,500 tonnes.
Southwest China’s Sichuan bucked the trend though, with ferro chrome output rising a modest 2.8% on month to 36,600 tonnes. Other producing regions largely maintained stable output levels last month, the survey results show.
The overall decline points to a more critical shift: China’s high-carbon ferro chrome smelters are now being forced to cut output as more smelters slip into losses.
Cost-price squeeze erodes margins
Ferro chrome prices drifted lower in August. By the end of the month, Mysteel’s assessment of the price of 55% high-carbon ferro chrome in Inner Mongolia, the key reference price in the domestic ferro chrome market, had fallen to RMB 7,925/tonne ($1,181/t), 50Cr, ex-works including VAT, lower by RMB 100/t ($15/t) on month.
Price cuts from major stainless steelmakers also exerted downward pressure on ferro chrome prices, with Tsingshan Group and Taiyuan Iron and Steel both lowering their procurement prices of this ferro alloy for deliveries this month, as Mysteel Global reported.
While ferro chrome prices fell, production costs moved in the opposite direction. Seaborne chrome ore prices ticked higher in the past month. Mysteel assessed the CIF price for 40-42% chrome concentrates shipped from South Africa to Tianjin at $286.5/dmt on August 31, up by $6.5/dmt from a month earlier.
As a result, the average cost for producing high-carbon ferro chrome using the semi-closed submerged arc furnace-electric furnace route rose to RMB 7,992/t ($1,191/t) in Inner Mongolia, up RMB 62/t ($9/t) from a month ago, and the average profit margin for local ferro chrome smelters swung from a modest 1.2% to a negative 0.8% accordingly.
Supply starts to tighten as losses deepen
The widening losses have significantly dampened production enthusiasm among smelters, Mysteel Global learned. Some smelters have begun implementing production controls through off-peak operations to capitalize on lower electricity prices, while others have chosen to undertake maintenance stoppages. Output in August fell for the first time since the production surge began in May, signaling a gradual reduction in supply from a previously “loose” state.
Demand-side catalyst on the horizon
On the demand front, pre-holiday restocking by end-users to prepare for production over China’s Mid-Autumn Festival and National Day holidays spanning late September and early October is expected to provide a boost to the high-carbon ferro chrome market, industry sources note.
Stainless steel producers in China typically ramp up their feedstock purchases ahead of the extended National Day holiday week, creating a periodic demand pull on ferro chrome raw materials.
During the traditional “Golden September” peak season, ferro chrome smelters are expected to see order books improve, which could further support a price rebound. Some industry participants believe late September may usher in a long-awaited price recovery for high-carbon ferro chrome.
Note: This article has been published in accordance with a content exchange agreement between Mysteel Global and BigMint.
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